National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Leigh of Hurley Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I support the amendment so ably tabled by the noble Baroness, Lady Barker. I pay tribute to her for her attentive nature during Committee. I say to the noble Lord, Lord Eatwell, that the fact there is this extensive list demonstrates once again the lack of an impact assessment, on which I implored the Minister in Committee.

I was a Minister for over 12 years. One thing you learn as a Minister is that, when taking a Bill through, you must consult with and speak to the sectors—you must talk to them and understand their challenges and then address those issues. Unfortunately, that had not been done. Take adult social care, where the impact is close to £1 billion. We may hear from the Minister that this has been addressed in the Budget, but it has not. The Nuffield Trust has said as much: the actual measures put forward in the Budget will be dwarfed by these contributions, and that is just in adult social care. Talk to community pharmacies and they will make a desperate plea, akin to what we have just heard from my noble friend, and say that they will have to shut. Why? Because they cannot afford to keep their employees.

Even at this late stage, I implore the Minister to listen, connect and communicate, and, I hope, to take on board some of the challenges and important concerns being put across in this House on behalf of the many different community services that will so desperately be impacted by these national insurance increases.

[Lord Leigh of Hurley (Con)]

My Lords, I am somewhat amazed by some of the arguments I have heard in this debate. The Bill is before us and we are a revising House. Our purpose is to debate the Bill, put forward amendments, debate the amendments and vote on them. The idea that we should not be changing this because we should not change the Budget is absurd; it defeats the whole purpose of having the House of Lords. We are a revising Chamber; we bring with us expertise and experience, which many of us would like to think assist the Government in their decisions, particularly when they make bad decisions—of which this is one.

The noble Lord, Lord Eatwell, talked about Adam Smith’s desire for simplicity, but he also wanted fairness. What has happened here is not fair. If the noble Lord consults the organisations with which I know he has been connected in the charitable and university sector, they will all say that this is a very unfair imposition on their modus operandi.

There is a reason why there are so many amendments. The first amendment is excellent, and passing it will deal with all the issues in one go. If it is not successful, other amendments will follow that will detail the sectors on which laws can focus their attention.

The noble Lords, Lord Eatwell and Lord Macpherson of Earl’s Court, and others may not have heard me in Committee, where I attempted to cost the various types of amendments, as well as the whole effect of the Bill, on the charitable sector. We have made attempts to detail them, and in other groups of amendments I will discuss those numbers and invite the Government to comment on them. The absolute total that the charitable sector itself has said that this would impact will be £1.4 billion, out of the alleged £22 billion black hole that the Government claim. We have made suggestions about how this may be recouped in other areas.

In Committee, I talked about the enormous damage that the Government are about to impact on the adult social care sector. It is utterly demotivating for the very many people, including me and others in this Chamber, who go out fundraising for such charities, doing our best to help those in need, only now to see the Government snatch it away in such a heartless manner.

In Committee, we discussed some of the big numbers. At that stage, I focused on social care and, as an example, the cost that Jewish Care faces—£1.1 million, which it does not have—to pay for this increase in national insurance. This time, I will discuss hospices, because I do not want to repeat what was said in Committee—albeit it was in Grand Committee and so did not allow us the opportunity to vote, which was extremely disappointing.

I will look at one hospice: Thames Hospice, which is close to Hurley. I was introduced to it by my then local MP, who is now my noble friend Lady May of your Lordships’ House. Its excellent CEO, Dr Rachael de Caux, is reported as explaining that it will now have to post a £1 million deficit and that the NI increases, together with the national minimum wage increases, will cost it £650,000. This is a charity that raises some £4 million from its fundraising, so that is a very material sum. As she herself memorably put it:

“The NHS is supposed to be from cradle to grave and what we have is from cradle to a few months before”


the grave.

Yes, a £100 million for the sector was announced before Christmas, but, as my noble friend Lord Howard of Lympne explained, it is a one-off spend over two years—actually, it is largely back-ended, with most of it in the second year—and restricted to capital sums. In fact, it is spread over 170 hospices, so it is a bit of an insult to claim that that is proper compensation.

Thames Hospice is looking to try to serve 400 people, mainly in their homes. I was very pleased to see that, in the amendment, proposed new paragraph (f) specifically covers those who are being cared for at home. As a charity, it is dependent on the local community for its generosity and financial support. The Government cover only about 30% of its costs, and the hospice has to raise £34,000 a day to provide all its services. The Government know that the demand for these sorts of services will grow. It is estimated that, in Thames Hospice’s catchment area alone, the overall demand for palliative and end-of-life care is expected to grow by at least 9% by 2030, with the number of deaths rising to 4,150 in 2030.

Perhaps the Minister can explain to Thames Hospice what it is expected to do, following this attack on hospices by the Government. Is it supposed to turn away people? Will it have to offer less care? It will see more people die in pain and agony, as it cannot offer the palliative care that it wishes to provide. I am sorry to be so graphic, but that is the choice for your Lordships’ House today. How can anyone hold their head up high if they walk through the Division Lobby seeking to cause such damage to the hospice sector?

[Lord Clarke of Nottingham (Con)]

My Lords, I agree with the noble Viscount, Lord Chandos, and others that, in principle, it is not a very good idea to have a system of taxation in which you suddenly start providing dozens of exemptions for particularly chosen groups when it is introduced. Taxation should be simple and collected in the most straightforward fashion across the whole economy, although there will always be bits that are subject to different effects of such taxes.

I will be supporting these amendments, mainly as a symbolic sign that I disapprove extremely strongly of the choice of tax rise that the Government made in the Budget. In fact, this increase in employers’ national insurance has had a serious, damaging effect on very important sections of the economy as a whole. Many small and medium-sized businesses—and many giant ones in labour-intensive parts of the economy—are being badly affected at a time when many other features of our financial crisis are affecting them as well. We had some exchanges in the House a few moments ago about the withdrawal of the investment proposals by BMW in Oxford. This country is not an attractive place for investment at the moment, yet we desperately need investment if we are to begin to recover from the appalling stagflation in which the economy is now stuck.

--- Later in debate ---

[Lord Bruce of Bennachie (LD)]

My Lords, I will briefly speak to Amendment 40, which is in my name. It asks for an impact assessment of this Bill on Scotland, because of the differences that have been identified.

The Government have said that they will compensate the public sector, but we are all waiting for the detail of how they will do it. A figure of £4.7 billion as the global sum has been mentioned, but not the detail. There is a concern that the structure of the public sector in Scotland is significantly different from that in England and that it may not be sufficient to sustain public services at even the current level in Scotland, where they ae struggling, as they are everywhere else. My own health board, Grampian, has had to absorb a £20 million charge just for this Bill, on top of a £75 million deficit that it is currently running. It is in a substantial crisis.

I have questions for the Minister. He will have seen the Fraser of Allander review of the impact; it may not be definitive but it is independent. It suggests that the impact is something around £550 million in Scotland. If one applied the normal rules of the Barnett formula, £4.7 billion would presumably give Scotland something between £400 million and £450 million. However, government officials in Scotland tell us that the Treasury has said the Barnett formula will transmit £300 million, or just over that. How can the Minister justify a £300 million transfer through the Barnett formula against a £4.7 billion overall budget for compensation?

More to the point, how will the Government establish the criteria for what level of compensation they will give to which kind of public bodies? If they do that, can they ensure that the same conditions that apply in England will follow through in Scotland, and that the money will go with them? All I am asking for is equality of treatment, not special treatment.

As I have said before, there is quite a lot wrong with what is going on in Scotland. The Scottish Government are not known for their efficiency in management; I am not trying to defend them and I do not think the UK Government should compensate them for their incompetence. However, I do not think that the public sector and the people of Scotland should suffer because of that, when an additional measure brought by the UK Government has added insult to injury or misery to misery.

Will the Minister acknowledge that, if he is talking about compensation of just over £300 million, that falls a long way short of the comparable impact, pound for pound, in Scotland compared with England? What are the criteria? Will they be applied fairly and consistently across the UK?

[Lord Leigh of Hurley (Con)]

My Lords, I will speak to Amendment 9, which is in my name. I suspect that it may have been subject to pre-emption, along with Amendment 8. If the noble Baroness, Lady Bennett of Manor Castle, is surprised, I am equally surprised that I think I agree with all of her remarks. That means that I would like to focus on Amendment 4, dealing with charity revenues of less than £1 million, which I believe is not subject to pre-emption.

According to the Charity Commission website, there are about 170,000 charities in the UK, with about £100 billion of income in aggregate and 1.3 million employees. My noble friend Lady Neville-Rolfe wants us to concentrate on those charities with an annual revenue of below £1 million.

There is different terminology that can be used by the Charity Commission, because it talks about gross income. On average, charities’ donations and legacies are about one-third of their total income, as was the case with the Thames Hospice, which I described earlier. The rest of the income is grants, investments and so on. A charity with £1 million of revenue will probably raise only some £350,000 in donations. I calculate from the available information that the sums raised by charities with revenues of less than £1 million total some £12 billion, which is 12% of total charity income. But there are 162,000 charities with an income of under £1 million, which means that we are talking about 95% of all UK charities.

As for their spend on national insurance, it is hard to determine, because we do not know exactly how much they spend on employment. We do know how much they spend on total expenditure, which is some £12 billion. If we assume that 50% of that—it is a very generous assumption—is on employee costs, and if we assume a salary of around £25,000, because it is a low-paid sector, then my noble friend Lady Neville-Rolfe’s amendment would impact only 240,000 people.

To try to answer the criticisms from the noble Lord, Lord Eatwell, I calculated that my noble friend’s amendment would cost the Government around £480 million—half a billion pounds. Is the Minister going to tell us that he is not prepared to protect 95% of charities for just £500 million? Does he recognise my figure? If not, what is the cost of the amendment? I invite him to join us in pausing the hike until we work out what it is, so that we can then have a meaningful discussion.

I remind the Minister that in a speech to the civil society summit last year, hosted by Pro Bono Economics, Sir Keir Starmer promised to reset the relationship between civil society and government. Is this what he meant? He said that

“for too long, your voice has been ignored”.

I have read the full speech, and he also said,

“we know it’s people on the ground, people with skin in the game, who understand the problems best and have the best answers”.

He continued in his speech to civil society leaders, which largely rubbished Tory policies, by saying,

“let’s be honest, for too long, your voice has been ignored between the shouts of the market and the state”.

Are the Prime Minister and his Ministers listening now? Those leaders are calling for this national insurance hike to be dropped.

Why would the Government want to penalise 162,000 charities, where our fellow citizens give so much of their time freely, and in many cases their cash, simply for the betterment of fellow citizens at home and abroad? It is a shameful imposition.

[Baroness Bennett of Manor Castle (GP)]

My Lords, on a point of clarification, I have received information that my Amendment 8 has not been pre-empted and still stands.